2009 Annual Results 10 March 2010 2 Andr Lacroix Group Chief - - PDF document

2009 Annual Results

10 March 2010

André Lacroix

Group Chief Executive

2

Strengthened industry leading position during the downturn

• Swift and responsive management of unprecedented

downturn

• Improved competitive position with focus on:
• Cost / cash initiatives
• Customer service / market share performance
• Resilient financial performance:
• Record operating cash flow generation
• Strength of balance sheet re-established

Uniquely positioned to take advantage of global car market recovery and industry consolidation opportunities

3

Group-wide streamlining of management focus

• n Top 5 Priorities

Major cost restructuring programme commenced Weekly performance management system to reduce inventory Changed management bonus metrics from economic profit to

• perating cash flow

Final 2008 dividend cancelled to protect 2009 cash flow Successful Rights Issue to re-establish balance sheet strength with support of our shareholders raised £234.3m

• Swift response to manage

an unprecedented global downturn

Oct 2008 Apr 2009 Nov 2008

4

2009 like for like operating expense reduction of c.£70m

73 0 6 6 0 710 20 28 23 1 1 9

600 620 640 660 680 700 720 740

2008 M usa & Others Adj 2008 Employee costs A&P Occupancy costs Other 2009

9.5% 2009 like for like cost reduction c.£70m

Bridge calculated in constant currency

5

253 57 77 50 100 150 200 250 300 Q4 08 Q2 09 Q4 09 £m

* Management definition of Working Capital: inventory, receivables, payables and supplier related credit ** At actual rates

Working capital reduction of £176m

Stock cover target of 1.5 months achieved 7 months ahead of plan

1,084 660 773 200 400 600 800 1,000 1,200 Q4 08 Q2 09 Q4 09 £m

Inventory Working capital

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Successful management of the downturn has improved Inchcape’s competitive position

Growing market share Growing aftersales Controlling working capital Selective capital expenditure Improving margin

Balanced focus on cost / cash flow and customer service / market share

Successful restructuring delivers L4L cost saving

• f £70m*

Significant destocking reduced working capital by £176m since Dec 08* Capex focussed on strategic sites in key markets New vehicle demand weak but share growth in most markets Resilient aftersales now c.50% of gross profit

* At 31 December 2009

Improved customer service across the Group

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189 164 151 187 195 237 293 184 337

50 100 150 200 250 300 350 400

2001 2002 2003 2004 2005 2006 2007 2008 2009

Profit and cash performance demonstrate the defensive strengths of Inchcape’s business model

Record operating cash flow generation

Operating profit* Cash flow from

• perations

£m at actual rates

Sales

3,113 3,414 3,793 4,120 4,488 4,842 6,057 6,260 5,584

1,000 2,000 3,000 4,000 5,000 6,000 7,000

2001 2002 2003 2004 2005 2006 2007 2008 2009

CAGR 7.6% CAGR 9.1% CAGR 7.5%

* Pre exceptional items Notes: 2001-2003 statutory but non IFRS basis

87 102 124 172 189 214 265 241 175

50 100 150 200 250 300 350 400

2001 2002 2003 2004 2005 2006 2007 2008 2009

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Financial Results

John McConnell

Group Finance Director

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Summary P&L

* Before exceptional items ** Adjusted to reflect the bonus element of the Rights Issue Note: All numbers at actual exchange rates

Change 2008 2009 (2.3)p 2.1ppt (18.7) (60.0) (27.2) (10.8) % 5.0 25.9 190.7 52.0 240.5 6,259.8 £m 2.7 Basic adjusted EPS (p)** 28.0 Tax rate (%) 155.1 Profit before tax* 20.8 Net financing costs 175.2 Operating profit * 5,583.7 Sales £m

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Segmental performance

* Before exceptional items Note: All numbers at actual exchange rates

(28.7) 192.9 137.6 Distribution Operating profit* (10.8) 6,259.8 5,583.7 (12.4) 3,605.1 3,156.7 Retail (8.6) 2,654.7 2,427.0 Distribution Sales Operating margin* (27.2) 240.5 175.2 95.8 (9.6) (18.8) Central costs (1.4) 57.2 56.4 Retail (0.7)ppt 3.8% 3.1% Change % 2008 £m 2009 £m 0.2ppt 1.6% 1.8% Retail (1.6)ppt 7.3% 5.7% Distribution

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Distribution: trading profit and margin

Trading margin* Trading profit* 5.7 0.4 13.0 10.2 6.4 3.8 5.6 2009 % 11.8 63.0 55.9 South Asia (27.5) (5.7) 3.9 UK 7.3 192.9 137.6 5.6 23.7 1.0 Russia and Emerging Markets 10.2 38.7 19.9 North Asia 4.8 39.9 30.2 Europe 7.3 33.3 26.7 Australasia 2008 % 2008 £m 2009 £m

* Before exceptional items All numbers at actual exchange rates

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Retail: trading profit and trading margin

Trading margin* Trading profit* 1.8 0.7 2.1 (0.8) 3.9 2009 % 0.2 0.7 (1.6) Europe 3.4 8.9 11.2 Australasia 1.2 28.8 42.8 UK 3.0 18.8 4.0 Russia and Emerging Markets 1.6 57.2 56.4 2008 % 2008 £m 2009 £m

* Before exceptional items All numbers at actual exchange rates

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Regional analysis: sales and trading profit*

Sales 2009 2008 Trading Profit*

* Pre central costs

Australasia 14% Europe 18% North Asia 6% South Asia 10% UK 36% Russia and Emerging Markets 16% Australasia 11% Europe 20% North Asia 6% South Asia 9% UK 37% Russia and Emerging Markets 17% Australasia 20% Europe 15% North Asia 10% South Asia 28% UK 24% Russia and Emerging Markets 3% Australasia 17% Europe 16% North Asia 15% South Asia 26% UK 9% Russia and Emerging Markets 17%

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Cash flow

* Includes fair value re-measurements ** Pre exceptional items All numbers at actual exchange rates

3.0 234.3 Share issue (54.0) (32.9) Net interest 31.2 35.6 Depreciation / amortisation 0.8 (8.0) (407.8) 416.6 7.7 3.0 (21.1) (31.9)

• 224.6

2009 £m 224.6 (48.9) (3.7) (58.5) 368.6 2009 £m (16.2) (101.8) (2.6) (57.6) 199.8 2008 £m 199.8 3.3 (75.2) 240.5 2008 £m 368.6 (21.1) 178.9 175.2 2009 £m (407.8) Closing net debt Free cash flow Operating cash flow 36.6 Translation on net debt* (213.5) Opening net debt (230.9) Net cash flow 13.3 Other 27.3 Disposals (153.0) Acquisitions (16.2) Pension Net capex (16.0) Share buyback Minority interest Other (73.1) Dividends Taxation Working capital (16.2) Free cash flow Operating cash flow Operating profit** 2008 £m Net cash Free cash flow Operating cash flow 15

Net financing costs

(18.2) (7.8) Interest on private placement notes (144.8) 67.7 FV on private placement

• 4.0

FV gain on swap restructuring (21.5) (9.2) Stock holding interest 2.8 (3.1) Mark to market expense (54.8) (21.7) Interest excluding mark to market (12.1) (6.1) Other including capitalised interest adj. 6.3 5.6 Pension interest net (20.8) (70.8) (4.2) 2009 £m (52.0) Total net finance costs 147.6 FV on cross currency interest rate swaps (9.3) Bank and loan interest 2008 £m

All numbers at actual exchange rates

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Exceptional items

(18.4) TOTAL (5.1) Restructuring costs (10.3) Other asset impairment (3.0) Vacant property Q2 2009 £m

All numbers at actual exchange rates

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Impact of currency on operating profit*

3.4 28.6 25.2 40.6 Europe 3.4 37.9 34.5 42.2 Australasia 175.2 (18.8) 46.7 147.3 5.0 55.9 19.9 2009 @ actual exchange rates 15.1

• 15.1

(2.7) 7.7 3.3 Impact 240.5 (9.6) 23.1 227.0 42.5 63.0 38.7 2008 @ actual exchange rates 46.7 UK 132.2 Total overseas 160.1 (18.8) 7.7 48.2 16.6 2009 @ 2008 actual rates Operating profit Central costs Russia and EM South Asia North Asia Full Year

* Pre exceptional items

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André Lacroix

Group Chief Executive

Strategic update and outlook

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2010 Outlook

• We remain cautious for 2010, continue to not expect start of a global

industry recovery until well into H2 2010:

• Consumer confidence is still weak in most countries
• Unemployment to continue to rise in many key markets
• From a geographic portfolio perspective, we expect:
• Stronger markets in Hong Kong and Australia
• Stable markets in Belgium and Finland
• Market declines in the UK, Greece, Singapore, Eastern Europe and Russia
• We have the financial strength and flexibility to continue to:
• Trade effectively
• Further improve our competitive position

We are confident in our ability to deliver a robust performance in 2010

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Disciplined performance management and consistent operational focus on our Top 5 will continue to strengthen Inchcape’s position

Growing market share Growing aftersales

Focus on our Top 5 Priorities in 2010 will be key to taking advantage of the global recovery

Selective capital expenditure Improving margin Controlling working capital

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Strong Inchcape Advantage processes in place to drive market share and aftersales

Retail Distribution

• Inchcape Advantage metrics captured daily

provides performance management data: service enquiries, bookings, hours sold, workshop productivity

• Express service
• Vehicle Health Check, Oil / Tyre programmes
• Disciplined use of NPS and Mystery Shop

feedback to continuously improve customer service

• Inchcape Advantage metrics captured daily

provides performance management data: traffic, lead capture, test drives, conversion

• Leveraging new model launches / F&I and

accessories up-sell

• Disciplined use of NPS and Mystery Shop

feedback to continuously improve customer service

• Targeted direct marketing to improve retention
• Parts & Accessories promotions
• Sales skills training for Service Advisors to

drive up-sell activities

• Innovative all-inclusive service packages
• Marketing calendar focused on driving traffic
• Targeted planning with lower advertising costs
• Innovation with new products / limited editions
• Campaigns focused on core models with

product and value for money offers

Growing aftersales Growing market share

Inchcape Advantage is our competitive advantage

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Toyota product recall update at 10th March

Key Facts

• Inchcape Toyota car parc 1.2m
• Customer enquiries 32k, 3% of car

parc

• Vehicles recalled for accelerator

repair in Europe 122k

• Accelerator pedal repairs by

Inchcape 24k

• 3rd generation Prius sold by

Inchcape 2400

• Prius services by Inchcape

1280 Key Initiatives

• Proactive communication with

Toyota customers

• Recall operation presents several
• pportunities:
• Reconnect with Toyota motorists

and update database

• Demonstrate superior customer care
• Additional service hours for each

repair

• Aftersales upside through Vehicle

Health Check

• Tracking in place to monitor impact
• n Toyota brand perception
• Q2 marketing calendar unchanged,

supporting launch of new Auris at Geneva motor show

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Key Initiatives Key Facts Key Facts

UK

Outperforming the industry

1.8m, -10% vs. 2009 2010 TIV est.

• Retail market up 14% ; Fleet / Business market down 21%
• Positive impact of scrappage scheme
• Inchcape outperformed market, gaining share of Premium segment and Total market
• Benefited from Used car demand and margin improvement
• Aftersales resilient in recession
• Strong cost reduction

2009

• Continue to grow market share through superior Inchcape Advantage Customer 1st processes and capitalising on

strong new product launches from Audi (A1), BMW (5 and 7 Series), Mercedes-Benz (CLS and E Estate) Toyota (Auris/HSD, Rav4), VW (Touareg, Sharan and Touran) and the Jaguar XJ

• Further develop prospecting / conversion / retention aftersales programmes with Inchcape Advantage initiatives

focused on appointment desk, follow-up calls, electronic vehicle health check and loyalty offerings

• Maintain significant achievements in working capital through tight stock control and overhead reduction
• Limit capital investment to brand standards requirements

2010 2m, -6.4% vs. 2008 2009 TIV

BMW 5 CLS E Class estate Auris Rav4 VW Sharan Jaguar XJ

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Audi A1

Europe

Focused on market share growth

180k, -24% vs. 2009 542k, +2% vs. 2009 2010 TIV est.

• Severe economic conditions, despite actions taken by government

to support sector

• Maintained clear leadership in an unstable market, achieving a total

market share of over 10% through swift adaptation to market conditions, effective campaigns, new products and Toyota Optimal Drive Technologies on core models

• Margin pressure due to aggressive competitor pricing
• Stronger H2 market share through extensive new model

launches: Avensis, IQ, Urban Cruiser, Landcruiser, Verso and Prius hybrid

• Successful Lexus launch of new hybrid RX450h and the IS

Convertible 2009

• Maintain market leadership position through further improving sales

funnel efficiency: Capitalise on new test drive programme and leverage face-lifted Rav4, Auris, Yaris, special editions and Toyota Optimal Drive

• Lead the hybrid segment growth with 3rd generation Toyota Prius,

new Auris Hybrid and Lexus Hybrid Drive

• Drive aftersales growth through new service reminder programme;

increase aftersales customer retention through enhanced loyalty programmes

• Grow margin through increased accessories sales per car sold plus

improved F&I penetration

• Customer-centric handling of Toyota recall
• Share growth built on strong momentum from January

Motor show and further roll-out of Inchcape Advantage processes into third-party dealer network

• Capitalise on launch of upgraded Rav4, Auris and Yaris,

special editions and promote Toyota Optimal Drive

• Lead the hybrid segment growth with Toyota Prius, the new

Auris Hybrid and Lexus Hybrid Drive

• Aftersales growth through Inchcape Advantage vehicle

health checks

• Plan for 2 new network openings and 5 refurbishments.
• Tight inventory management and control aged stock.
• Customer-centric handling of Toyota recall

2010 236k, -19% vs. 2008 531k, -14% vs. 2008 2009 TIV

Greece Belgium

Rav4 Auris Yaris Land Cruiser

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South Asia

Strong leadership in a constrained market

60k, -25% vs. 2009 2010 TIV est. 80k, -28% vs. 2008 2009 TIV

• Market decline accelerated by a slowing of deregistrations and high COE prices
• Gained 3.7 ppt market share to 21.4% due to strong marketing campaigns, weakening parallel importers

and successful leverage of new products (Toyota Prius, Wish, HiAce, Lexus IS250C, RX350/450h)

• Excellent performance in aftersales through innovative marketing programmes

2009

• Strengthen market leadership position through the launch of Camry Hybrid, Wish 1.8, the new Vios, the new

Suzuki Grand Vitara and good value limited editions

• Lead hybrid segment growth with Toyota and Lexus Synergy Drive
• Drive customer funnel conversion through improved lead management and focus on test drives
• Outperform aftersales market through expansion of customer contact team and activities to grow enquires

traffic and capture rate

• Maintain inventory levels in line with demand
• Proactive brand management and high level of customer care following Prius recall

2010

Singapore

Camry Hybrid Wish Grand Vitara

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Vios Altis Lexus RX 270

North Asia

Taking advantage of a strong market recovery

32k, +20% vs. 2009 2010 TIV est.

• Maintained market leadership position despite aggressive pricing from European competitors as they

sought to clear stock, a weak commercial vehicle segment and issues of weak supply in H2

• Successful new product launches: Toyota Alphard 240, Wish 2.0 and Ractis, Lexus RX350/450h, ISC and

Mazda 3 and 2

• Strong growth in aftersales with improved recovery rate
• Significant reduction in working capital

2009

• Leverage another strong year of new product launches to grow market share and margin: Toyota Prado,

Previa, Vellfire and Wish 1.8. Lexus RX270, Mazda5, Mazda6 and Jaguar XJ

• Grow the hybrid category with industry leading Synergy Drive technology
• Continue growth momentum in aftersales performance through innovative marketing programmes and

added-value packages (e.g. free pre-MOT inspection, packaged car care product promotions)

• Treat Prius recall as opportunity to further cement Crown Motor’s reputation for superior customer service.

2010 27k, -28% vs. 2008 2009 TIV

Hong Kong

Prado Previa Vellfire Wish Lexus RX Mazda5 Jaguar XJ Mazda6

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Australasia

Growing share in a strong market

950k, +2% vs. 2009 2010 TIV est.

• Record Operating Profit. RoS 3.9%
• Strong aftersales growth driven by express service

initiative

• Strong used car demand and margins
• Record Subaru market share of 3.9%
• Successful launch of new Liberty/Outback and

Exiga

• Forester No 1 Compact SUV
• Strong Aftersales performance

2009

• Grow vehicle volume through Customer 1st

processes

• Leverage full year of new model launches
• Grow aftersales
• Maintain tight control of inventory
• Leverage FY new model launches – Liberty /

Outback and Limited Editions

• Launch ‘All for the Driver’ campaign
• Maintain tight control of overheads and working

capital

• Grow aftersales

2010 937k -7% 2009 TIV

Australia Retail Australia Distribution

Subaru Outback Subaru Liberty Subaru Forester Subaru Impreza Subaru Tribeca

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Russia

Outperforming the competition

1.3m, -8% vs. 2009 2010 TIV est. 2009 TIV 1.42m, -52% vs. 2008 2009

• Market fully impacted by the downturn but our large scale facilities delivered solid profitability
• Market share improvement in St Petersburg and Moscow supported by new model launches from

BMW (X1, 5GT), Audi (R8, Q7, A5 sports back, TT RS, A5), Land Rover (Discovery 4) Peugeot (308) and Renault (Laguna and Megane Coupé, Kaleos D and Clio)

• Successful integration of Musa Motors into Inchcape Russia. Significant overhead cost reduction

2010

• Continue to improve our competitive position in St Petersburg and Moscow through superior operating

and customer facing processes

• Leverage strong new product launches from BMW (X3, 5 series), VW (Touareg), Volvo (S60), Lexus

(GX460), Audi (A1, A7, A8)

• Continue to grow aftersales through traffic-driving programmes, improved sales skills and vehicle

health checks

• Rigorous focus on margin, overhead management and control of working capital

Audi A1 BMW 5 Touareg Volvo S60 Audi A7 Sanero Megane Coupé BMW 3

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Emerging Markets

Strengthening our position

9.9m, +15% vs. 2009 340k, +6% vs. 2009 135k, -25% vs. 2009 17k, -25% vs. 2009 2010 TIV est.

• Ramp-up new Shanghai

site

• Focus on market share

and aftersales growth with Inchcape Advantage

• Identify expansion
• pportunities
• Government stimulus

measures resulted in significant growth of cars <1.6 litre

• New Lexus centre in

Shanghai

• Strong team in place and

site economics making good progress 8.4m, +48% vs. 2008 China

• Grow share in Bulgaria and

Romania with strong focus on Yaris and Auris

• Focus on aftersales upselling,

price packaging

• Markets extremely

challenging, reflecting credit availability issues and economic instability

• Strengthened leadership

position in Bulgaria. 167k, -54% vs. 2008 The Balkans

• Disciplined daily sales funnel

management

• Leverage new product

launches

• Implement Inchcape

Advantage aftersales processes

• Tight cost control
• Markets extremely

challenging, reflecting credit availability issues and economic instability

• Structural rightsizing

23k, -66% vs. 2008 The Baltics

• 1% GDP growth
• Leveraged new location to

achieve Revenue and GM growth

• Positive impact from Inchcape

Advantage for aftersales

• Record profitability

2009

• Continue to grow market

share, aftersales and margin

• Leverage strong new product

launches from BMW: X3, 5 series sedan and touring, 3 series Coupé and Convertible. 2010 320k, +0% vs. 2008 2009 TIV Poland

Rav4 Auris Yaris BMW X3 BMW 5 BMW 3

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Uniquely positioned worldwide

• Global industry leader…
• Biggest and strongest independent

Distributor and Retailer in global car industry

• Broad geographic spread, one of the

UK’s most international retailers

• Operate in 26 mature and emerging

markets – a leader in 14

• Scale presence in core markets
• Growth and Defensive value drivers
• …strong EBIT and cash

performance in the downturn…

• Market share gains
• Quality of business model/scale
• Importance of defensive value drivers
• Right balance on cost/cash initiatives and

customer service/market share performance

• …creating great value from great

brands…

• Partner to the strongest automotive

brands

• Differentiated customer service strategy

with a proven track record delivering superior customer service at each stage

• f customer journey
• Proprietary operating processes/metrics
• Operational excellence a key advantage

for emerging market expansion

• …best positioned for the global

recovery.

• Organic growth with strong operational

gearing opportunities

• Green technology to accelerate vehicle

replacement cycle in developed markets

• Increased wealth together with low car

penetration to create demand in emerging markets

• Financial firepower to take advantage of

consolidation opportunities

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Appendices Appendices

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Definitions

Like-for-like The following are excluded from like-for-like sales: 1. Businesses that are acquired, from the date of acquisition until the 13th month of ownership 2. Businesses that are sold or closed 3. Retail centres that are relocated from the date of opening until the 13th month of trading in the new location

Appendix V – Definitions

Emerging markets Emerging markets are those markets in which the Group operates that have started to grow but have yet to reach a mature stage of development and accordingly are in the growth phase of the development cycle This currently covers the following countries:

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• Russia
• South America
• Poland
• Africa
• The Baltics
• China
• The Balkans

Hong Kong (ML)

Broad geographic spread – truly international

United Kingdom (MLP)

37% of ’09 Group Revenue 24% of ’09 Group Trading profit

R

North Asia

6% of ’09 Group Revenue 10% of ’09 Group Trading profit

VIR

South Asia

10% of ’09 Group Revenue 29% of ’09 Group Trading profit

VIR

Australasia

14% of ’09 Group Revenue 19% of ’09 Group Trading profit

D R

Finland Luxembourg

Europe

18% of ’09 Group Revenue 15% of ’09 Group Trading profit Belgium

D R

Greece (ML)

D R D R D R

Brunei (ML) Guam (ML) Saipan (ML) New Zealand

VIR VIR VIR D Key: R = Retail D = Distribution VIR = Vertically integrated retail (ML) = A market leader (MLP) = A market leader, premium brands

Note: Percentage figures represent revenue from third parties and trading profit (defined as operating profit excluding the impact of exceptional items and central costs)

Russia and Emerging Markets

15% of ’09 Group Revenue 3% of ’09 Group Trading profit Albania

D

Bulgaria (ML)

D R

Macedonia

VIR

Romania

D R

Peru (MLP)

VIR

Poland

R

Latvia (ML)

VIR R

Macau (ML)

VIR

Lithuania

(ML) VIR R

Australia Singapore (ML) Russia

R

China

R

Estonia

VIR R VIR

Chile (MLP) Ethiopia (ML)

VIR

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Disclaimer

The information and opinions contained in this presentation are provided as at the date of the document. Certain statements in this presentation, particularly those regarding the future prospects of Inchcape plc (“Inchcape”), returns, pricing, acquisitions, divestments, industry growth or other trend projections are or may be forward-looking statements. These forward-looking statements are not historical facts, nor are they guarantees of future performance. Such statements are based on current expectations and belief and, by their nature, are subject to a number of known and unknown risks and uncertainties which may cause the actual results, prospects and developments of Inchcape to differ materially from those expressed or implied by these forward-looking statements. Except as required by any applicable law or regulation, Inchcape expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this presentation to reflect any change in Inchcape’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. All information in the presentation is the property of Inchcape plc and may not be reproduced or recorded without the written permission of the company. Nothing contained in the presentation constitutes or shall be deemed to constitute an offer or invitation to invest in or otherwise deal in any shares or other securities of Inchcape plc.

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